The New Kind of Capitalism That Serves Humanity's Most Pressing Needs

Interview with Muhammad Yunus, author of Building Social Business: The New Kind of Capitalism That Serves Humanity's Most Pressing Needs

It all started with a gift of $27.

In 1974, Muhammad Yunus was an economics professor atChittagong University in Bangladesh when a combination of war, natural disasters and an international oil crisis toppled his country into a devastating famine. How could he simply teach elegant theories of the free market, he thought, while hunger and poverty threatened the lives of millions?

Venturing into the countryside to experiment with social programs, he found a woman in the village of Jobra who was borrowing from a local moneylender to finance her tiny business handcrafting bamboo stools. But she could borrow only at a very high interest rate and by agreeing to sell her work to the lender at a price he set, leaving her with almost no profit.

Yunus and his students found a total of 42 villagers trapped in the same kind of arrangement. He realized that he could release all of them from their economic bondage by reaching into his pocket for the equivalent of $27 and paying off all their loans.

Inspired by this example, Yunus created Grameen Bank to make low-interest loans to the poorest of the poor, people with no collateral or credit history. Today it serves more than 8 million people—97 percent of them women—in every village in Bangladesh, extending more than $100 million a month in loans averaging about $200. Grameen is also helping to spread the idea known as microcredit throughout the world—and in 2006, Yunus and the bank were awarded the Nobel Peace Price for their accomplishments.

Seeking new ways for the power of the market to help the poor, Yunus landed on the concept of “social businesses.” These companies operate like any other, competing in the marketplace to make a profit, with two big exceptions: The investors agree not to take any money from the company beyond their original investment, and the overriding goal is to deliver a particular social benefit to people in need.

Grameen now operates dozens of social businesses in Bangladesh. These companies provide affordable nutritious foods, extend telecommunications services into isolated rural areas, export hand-loomed traditional fabrics, and much more.

Their effects are being felt in Bangladesh’s improving poverty rate. But Yunus’ ultimate goal, at age 70, is to eliminate poverty throughout the world by 2050.

Yunus introduced his ideas about social business in a 2007 book,Creating a World Without Poverty, and expands them in the recently published Building Social Business.

In a conversation with the AARP Bulletin, he discussed his ideas and how they apply to older Americans.
(Read an excerpt from Building Social Business.)

Q. How could social businesses address the problems that older people face?
A. Old age can be an attractive area for social business. In Eastern societies, a family not only takes care of its own old members, but the old remain important members of the family. In Western countries, the young people move away and old people are left alone. When they cannot take care of themselves, they are sent to old-age homes. Through their social businesses they can participate in activities where they will remain surrounded and admired by young people all the time.

Q. Why would they be attracted to this kind of business?
A. During their working years, people generally are engaged in a rat race, chasing success. In old age, the rat race is over. People have created their financial base. They may feel that this is the time to devote themselves totally to the benefit of others in the society. They can use their wealth to do something sustainable, which will remain beyond their lives. Social business provides that framework.

Q. What qualities could older people bring?
A. Most old people are physically and mentally capable. They have good ideas, creative energy and plenty of unrestricted time. They can create social businesses to prove to themselves they can significantly contribute to the society rather than feeling like “unwanted” people. The best quality is their experience. After all, they have gone through their life. They have seen many things that the new generation has not seen yet, or may never see.

Q. What rewards might they enjoy?
A. When a person is retired, he or she is a free person, not bound by the rigid framework of working life. He can bring out the things that he has been holding inside him all these years. That’s a tremendous freedom! He can set his agenda, his priorities, his working hours, everything. He can form a group of like-minded people. Technology helps: Facebook, Twitter, chat rooms, Skypeand so forth.

Q. Since poverty is so much deeper elsewhere in the world, should Americans focus on social problems abroad rather than in their own country?
A. The best way to start is to start in one’s own neighborhood. You don’t have to jump off to another place that you know very little about.

Q. For instance?
A. You can start a social business whose objective would be to take 10 people out of welfare by offering them employment. This is one issue everybody is interested in. If you can find the solution for it in a sustainable business way, you would be a hero for the whole world!

Q. Why can’t normal businesses do this?
A. Conventional profit-making businesses do not come forward to start a business unless they have at least a 30 percent return on their investment. But a social-business investor can operate anywhere, as long as there is a positive return. As long as you cover your costs and solve a social problem, you can be in social business.

Q. Can social business flourish in America without some effort first being made to teach people to care less about themselves and more about their society?
A. Whether I am an American or I am a Bangladeshi, we all have the same basic human qualities. When I talk about selflessness, I’m talking about the selflessness that is embedded in all human beings. You may argue that Americans have successfully locked it up inside. All we have to do is to find a way to unlock it.

Q. What is that way?
A. When I see you are helping five people get out of welfare, suddenly I am thinking, hey, I could have done that, too. So demonstration is one thing that can start loosening that lock.

Q. What else?
A. We can also start in childhood, by putting social business stories in storybooks, textbooks and other teaching materials. Let everybody know that there are two kinds of businesses: a business to make money for oneself, and then there is a business to make an impact on other people’s lives. A child may start to think, I like that idea of social business. I would like to do something like that.

Q. How could you get these ideas across to a big audience?
A. Maybe some moviemakers would make a movie of a whole city that has been transformed by social business, the first in the U.S. which does not have anybody on welfare. The movie may make people aware that they can create things that will change things in a big way—to start realizing that they are part of a bigger whole. Once we start looking at us this way, the locked-up part in us starts opening up.

Q. Give us a peek over the horizon. Are you developing other projects that could help achieve your goal of ending poverty?
A. I am concentrating on two things. I think technology is changing the whole world very fast. But all the power of technology is concentrated in the hands of businesses. Obviously they use this power for making more money. I’m looking for how technology can solve problems.

Q. For example?
A. Creating a digital Aladdin’s lamp. Every poor person will have easy access to it. A poor old woman in a Bangladeshi village will touch this lamp, and the digital genie will come out of it and say, “What can I do for you, ma’am?” The old lady says, “I want to sell the baskets that I have made, but I cannot find buyers.” The genie goes out and finds the buyers.

Q. Is this possible?
A. That technology is right here today! Look at the iPad, look at the iPhone—you touch it, and it happens. But that genie serves the privileged people like us. If I can use this same technology to teach the illiterate people around the globe how to read and write, how to connect with each other, how to send written messages, how to get health advice and so on, we can apply this technology to solve many of our problems.

Q. What else are you doing?
A. I am also focusing on the emerging new generation—how to prepare them to become the kind of people who will not remain obsessed with their own lives but will think of the problems of the world. Today’s generation is more interested in issues of other people and wants to make a difference in the world. They’re looking for a meaningful life. We can make them believe that each one of them has the capacity to change the whole world. Social business can help them find it.

Q. How could AARP members participate in social business as an organization?
A. An organization like AARP can provide opportunities for channeling energy. It can encourage creation of five-member, 10-member “social business clubs” to find solutions to problems. It can encourage creation of “social business centers” where 50 or more people can meet together and look for solutions for taking people out of welfare, or taking drug addicts out of addiction, or taking care of very old people who cannot care for themselves.

Q. How could AARP, or any organization, make this happen?
A. Hold a social business laboratory, so that our people can come and discuss what social business means and how to design a social business. It is already happening all over the world. You can join the network. We can connect you to people, and if you have questions, we can respond. Just write to us at the Yunus Centre,and we can connect you. You can also visit our website, www.yunuscentre.org.

Art Dalglish is an editor and writer from Maryland.

By: Art Dalglish
Published: July 29, 2010
Source: AARP Bulletin
Link: http://www.aarp.org/entertainment/books/info-07-2010/in_business_for_all.html